Cenvat credit reversal and trading activity: demand under Rule 6(3)(i) held unsustainable on available payment records.

Rule 6(3)(i) of the Cenvat Credit Rules, 2004 was examined in the context of trading activity treated as an exempted service and alleged common use of input services. The demand was found unsustainable because the clearance data and year-wise payment particulars showed that the relevant clearances had already suffered excise duty or were otherwise covered by Cenvat credit reversal or payment details, except for a limited period where no credit had been availed. The absence of item-wise details was not treated as decisive, as the available worksheets and payment records were sufficient to negate the demand.

---

---

Issues: Whether the demand under Rule 6(3)(i) of the Cenvat Credit Rules, 2004 was sustainable in respect of trading activity treated as exempted service, when the clearances forming the basis of demand had suffered excise duty or were covered by Cenvat credit reversal/payment details.

Analysis: The demand was founded on the premise that trading of goods constituted a deemed exempted service and that common input services were used for both manufacturing and trading. The record showed year-wise payment particulars demonstrating that the clearances on which the demand was raised had, in substance, already suffered duty or Cenvat treatment, except for a limited period where no Cenvat credit had been availed. On that footing, the basis for invoking the 6% / 7% amount under Rule 6(3)(i) did not survive. The absence of item-wise details was treated by the lower authorities as fatal, but the available worksheets and payment particulars were sufficient to negate the demand.

Conclusion: The demand under Rule 6(3)(i) was not sustainable, and the assessee succeeded.

---